Rejuvenating St. Paul: A Vision Doomed to Fail?

Posted by Kris Lindahl on Wednesday, August 7th, 2019 at 3:29pm.

http://www.minnesotacommercial.com/blog/shopping-for-business-and-fun-at-st-pauls-former-downtown-macys.html
http://www.minnesotacommercial.com/ramsey-county-commercial-real-estate.phpA bold three-phase plan to forever change the character of St. Paul's riverfront, and its entire downtown, would add well over one million square feet of office space, hundreds of new apartments and condos, luxury hotel rooms, along with approximately 1,500 or more parking spaces and new access to the water from the city's current bluffs. This is in addition to those changes at the former downtown Macy's store. The dramatic plan originally received tentative approval from Ramsey County in November 2018. But there is still a lot of uncertainty surrounding the bold proposal.

What is truth and what is hyperbole may be difficult to sort out. Even if the project gets started, will it reach completion?

Reality of New Workspace Needs

Ramsey County commissioners authorized a six-month due diligence study last November, and received an initial report in April 2019 from Los Angeles-based AECOM. Recently-announced details, which are nothing if not dramatic, could potentially cost upwards of $1 billion, and there is now some vocal pushback surrounding the feasibility of the ambitious project.

Local commercial space absorption rates, according to at least one dissenter, do not justify a massive increase in office space. Existing vacancies might take a decade to fill, notes Transwestern Managing Partner Mike Salmen, whose company oversees leasing the space at the renovated Osborn 370 Tower. However, Brian Dusek, managing partner at AECOM, points out that some tenants have left the downtown area due to the lack of suitable Class A office space. He also claims that current vacancy rates are inflated, and that the rosy picture of available space includes some that isn't true Class A space.

Dusek readily admits that challenges exist, but also says that the three-phase plan will put initial emphasis on downtown residential and hotel space, citing a need based on low multi-family vacancy rates and a history of rising rents. He also points to the past decade of corporate flight from the downtown area, noting that almost 20 years have passed since the last new office building was constructed in downtown St. Paul. There also is no availability of space for a major tenant, something that new office towers would provide.

Additionally, a pending plan to relocate some state agencies from currently leased downtown space to a newly-built complex at the site of the former Sears building, might seriously impact current and future need for office buildings downtown. However, that plan has not been finalized, and some proponents of new downtown development, including Dusek, point to the live-work advantages of the planned downtown project.

Decades-Old Effort Is Complicated by Topography, Railroads

As long ago as 1992, St. Paul recognized the need to address the riverfront's future. The current addresses redevelopment of the former West Publishing site and the former jail, both of which were razed by the country at a cost of approximately $17 million in order to make the sites more attractive to developers.

Previous efforts over the years, including a previous request for proposals, have invariably failed. Part of the difficulty of redevelopment centers around topography. The Mississippi River bluffs adjacent to the building site constitute an elevation difference of approximately 80 feet from the downtown street level at Kellogg Ave. to the Shepard Road along the river.

Other considerations center around existing rail traffic in the area. Three separate railroads would have to grant permission for air rights over their property for what is termed a "lid" over the tracks. Insurance costs to cover the liability of running trains through the finished development would invariably skyrocket. And there are other associated risks and concerns.

The proposed land bridge would allow easier access to the river, eliminating the need to traverse the tracks, or negotiate vehicular traffic and steep bluffs. The often-ignored waterfront is slated to become a primary attraction of the newly-rejuvenated area. The land bridge would effectively expand the development area from the current five acres to 12, with parking stalls for at least 1,500 vehicles underneath. It is also expected to include green space, waterfalls and enhanced views. What is unclear is if any, or all, of these amenities would require public funding.

More Answers Expected in July

Officials posed a variety of questions to the developer, setting a tentative date of July 23 for a joint workshop between the country board and the developer. Officials expect a response to concerns that include disability access, specific design details, perhaps a more detailed timetable, and possible commitment of public funding to assist the developer.

The country's redevelopment manager, Josh Olson, reports that AECOM seems committed and has allocated time, energy and its own funding to the project; they are already in negotiation with the railroads, he says, adding that he receives weekly updates on project progress. If the redevelopment is to proceed, the parking facility, scheduled to be located against the bluffs, would constitute the initial phase, followed by the first of four planned towers with 80 condos and a 150-room hotel, and a smaller 12-story, 400,000 square-foot office building.

The next phase would include both apartments and offices, with the final tower slated for building and development at a later date. However, continued growth in commercial properties is expected to continue in areas outside of the downtown St. Paul core in Ramsey County.

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